Macroeconomic factors and centralization issues are putting pressure on the post-merger Ethereum price.
The Ethereum merger on September 15 proved to be an event that looks set to continue.
Drops significantly against the US dollar and bitcoin
after merger. As of September 22, ETH/USD and ETH/BTC trading pairs have dropped over 20% and 17% respectively since Ethereum switched to Proof-of-Stake (PoS).
Daily price chart for ETH/USD and ETH/BTC. Source: Trading View
What do ethereal bulls eat?
Several catalysts contributed to the decline in ether during this period. First, ETH’s decline against the dollar was synchronized with a similar decline in other crypto markets, driven by a 75 basis point (bps) increase in the Federal Reserve rate.
Second, Ethereum has received a lot of criticism since the merger for being too centralized.
So far, only five businesses have produced 60% of the blocks. The largest stake is held by Lido DAO, an Ethereum staking service, with 4.19 million ETH invested, or more than 30% of the total invested in the official Ethereum PoS smart contract.
Total ETH 2.0 value provided by the provider. Source: glass knot
Third, institutional investors, or “smart money,” also reduced access to Ethereum-focused investment vehicles the day before and after the merger.
In the week ending September 16, Ethereum funds recorded $15.4 million in capital outflows from their coffers, according to CoinShares’ weekly report. In contrast, Bitcoin-backed mutual funds raised $17.4 million in the same week, indicating the post-merger capital outflow.
Finally, Ethereum came under intense pressure from Proof-of-Work (PoW) miners who sold $40 million worth of Ether in the days leading up to the PoS upgrade.
Referring to ETH/BTC’s previous reaction to major events in the Ethereum market, as shown below, independent market analyst Tuur Demeester noted that Ether’s decline against Bitcoin could continue in the coming days.
ETH/BTC price dynamics around major Ethereum events. Source: Trading View
The chart shows the practices of Ethereum traders pumping ETH against Bitcoin before adoption narratives such as non-tradable tokens (NFTs) and the decentralized finance craze and initial coin supply (2017 boom) in 2021.
All these rallies came to naught as soon as the hype subsided. Demister highlights Ethereum’s transition to PoS as a phase of similar hype that boosts ETH/BTC in 2022 and expects the pair to undergo a deep correction in the coming weeks.
“I expect ETH/BTC to drop at some point,” he said.
“ETH is a ticking time bomb.”
ETH/BTC technical data points to 10% drop
Putting these fundamentals against Ethereum’s technical performance against Bitcoin would similarly represent a bearish trend.
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On the 3-day chart, the ETH/BTC pair is down almost 25% after hitting 0.085 BTC; This level coincides with the long-term resistance level of 0.081 BTC.
The pair is now expecting an additional drop towards the several-month uptrend support line as shown below.
Three-day ETH/BTC price chart. Source: Trading View
Trendline support is falling in sync with 0.06 BTC, a level that acts as a retracement zone in 2022. In other words, another 10% decrease is expected.
Bearish ETH/USD setup worse
Ether could drop as low as 45% against the dollar due to what appears to be an ascending triangle in a downtrend.
Three-day ETH/USD price chart with an ascending triangle pattern. Source: Trading View
Typically, a downtrend pattern is resolved after the price drops below the lower trendline and then drops to the maximum. Therefore, the downside target for the end of this year is around $700, which is 45% below the September 2 price.
Conversely, a pullback from the lower trendline of the triangle could see Ether rise towards the upper trendline, which would mean a rise to $1,775 or a 35% gain from current price levels.
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